BGE must eat half of its requested $152M rate increase

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Baltimore Gas and Electric (BGE) and its investors will have to shoulder about half of the $152 million the utility sought to recover for infrastructure, maintenance and other spending in 2023.

The Public Service Commission (PSC), which regulates utilities, on Monday granted $77.2 million of BGE’s request for reconciliation of its 2023 expenses, after it spent $152 million more than it was authorized to collect from consumers.

The decision means the average ratepayer’s monthly bill will increase by 72 cents for electricity and $1.95 for gas. The rate increase begins in February and continues through the end of 2027.

The commission found that in many cases, BGE’s spending was “not just and reasonable.” It added that the request amounted to a “misuse” of the multi-year rate plan and reconciliation process.

The regulator wrote that approving the request, which was based on “questionable forecasting, followed up by substantial overruns of its approved budgets, would wrongly reward the utility’s performance rather than encourage a more disciplined approach to managing for results that benefit both the utility and its customers.”

BGE must show that its cost increases were “prudently incurred” and that it exercised “good management judgment” for the state to approve increases. The PSC noted that the 2023 request was more than double the previous two years’ approved reconciliation amounts combined.

BGE argues the reconciliation request was driven by inflation and supply-chain disruptions.

“BGE understands that energy bills are a top concern for our customers, and we take that responsibility seriously,” BGE President and CEO Tamla Olivier said in a statement.

“While we appreciate the Commission’s focus on keeping costs low for customers, we have a responsibility to keep the power system operating reliably and safely which requires maintenance work on our systems,” she said. “BGE weighs every expense carefully, with customer costs in mind every step of the way. The work we did strengthened reliability, improved safety, and responded to severe storms — necessary and critical work for customers and the reliability of our systems.”

Concerns over BGE’s ratemaking, oversight

The Office of People’s Counsel, which represents residential utility consumers, asked the PSC not to approve any of the reconciliation request.

“Although we are disappointed that the Commission did not deny the request in full, we are relieved that the Commission took a hard look and denied a substantial portion of BGE’s request, relying in many cases on evidence we presented,” People’s Counsel David Lapp stated.

This is the last year for which BGE is going through the reconciliation process, where utilities retroactively request reimbursement through rate increases.  The Next Generation Energy Act, which state lawmakers passed earlier this year, ended the reconciliation process beginning with 2024. The law still kept in place the multi-year ratemaking process, which seeks future rate increases.

Emily Scarr, senior advisor at the Maryland PIRG Foundation, a consumer advocacy group, said it’s time to get rid of the multi-year ratemaking process altogether.

“BGE’s request for $152 million illustrates how multi-year ratemaking supercharges the utility’s incentive to spend money to make money, leaving customers with higher bills and lower service quality,” Scarr said.

Meanwhile, the PSC is investigating accusations of fraud at BGE. Late last year, several former employees accused a BGE staffer of falsifying documents and failing to conduct proper inspections of gas infrastructure, including during 2023.  The PSC in April “identified gaps in BGE‘s quality assurance and compliance oversight as it relates to the inspector in question.” In May, the former employees’ petition to intervene was granted.

“This is a major win for Maryland ratepayers,” said David Baña, a lawyer for the former employees.

“By cutting BGE’s request nearly in half, the Commission sent a clear message that multi-year rate plans are not a blank check ,” he added, “and that budget overruns will be scrutinized and not rubber-stamped.”